Does the Gold Star company have discretion in applying payments received from the franchisee?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
when due shall bear interest from the date due until paid at the rate of one and one-half percent (1.5%) per month, or the maximum rate permitted by law, whichever is less. Any payment not made when due also shall be subject to a late payment administrative charge of One Hundred Dollars ($100). Entitlement to such interest and charge shall be in addition to the COMPANY's right to terminate this Agreement and any other remedies the COMPANY may have with respect to such late payment.
- 8.5 Company's Sole Discretion. Notwithstanding any designation by FRANCHISEE, the COMPANY shall have sole discretion to apply any payments by FRANCHISEE to any past due obligations of FRANCHISEE to the
- COMPANY or its affiliates in such manner and order as the COMPANY deems appropriate in its sole discretion.
- 8.6 Company's Security Interest. FRANCHISEE hereby grants the COMPANY a first priority security interest in all inventories, supplies and equipment of FRANCHISEE and any items sold by the COMPANY to FRANCHISEE in order to secure the payment of any of FRANCHISEE's obligations to the COMPANY. FRANCHISEE will execute all documents required to effectuate and perfect the COMPANY's security interest, and if FRANCHISEE does not do so, the COMPANY may execute the documents in FRANCHISEE's name and on FRANCHISEE's behalf, and FRANCHISEE irrevocably appoints the COMPANY as FRANCHISEE's attorney-in-fact to do so.
- 8.7 Gross Sales.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, Gold Star has the sole discretion to apply payments received from franchisees towards outstanding debts. Specifically, notwithstanding any payment designation made by the franchisee, Gold Star can allocate payments to cover any past due obligations the franchisee owes to Gold Star or its affiliates. This discretion extends to determining the manner and order in which these payments are applied.
This provision means that if a Gold Star franchisee has multiple outstanding debts, such as royalties, marketing fund contributions, or supply purchases, Gold Star can choose which debt to satisfy first, regardless of the franchisee's preference. This could impact a franchisee's financial planning, especially if they intend a payment to cover a specific obligation.
Additionally, all payments received by Gold Star from the franchisee may be applied by Gold Star to Gold Star's obligations to the company or its affiliates in such order and manner as Gold Star determines in its sole discretion. This gives Gold Star significant control over how payments are allocated, potentially affecting the franchisee's financial obligations and relationship with the franchisor and its related entities. Franchisees should be aware of this provision and its potential implications for their financial management and payment strategies.